2004, Question 3 · 7 points
Fed bond purchase and money multiplier
Find the money supply change from a Fed bond purchase under a 100 percent reserve ratio, calculate one bank's lending and the maximum money supply increase at a 10 percent ratio, and explain how excess reserves and cash holdings shrink that increase.
This exam had three free-response questions to answer in 50 minutes of writing time after a 10-minute planning period, with about half the time suggested for Question 1 and the rest split evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.
Lessons this question draws on
1 Read the question
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Scoring guidelines (PDF, page 5) What the exam readers saw (Student Performance Q&A)
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